As stated before you, this is already a rather well-known practice. What I would like the public debate to be about is how exactly do these people manage to get away with what is essentially fraud and why law enforcement continues to ignore it?
Almost every case I've heard of where an actor or director sued the studio for cooking the books; the studio loses. Why is this not considered a criminal practice? If I were an IRS agent, flying-spaghetti-monster forbid, I think I would make a call to the studio after one of these cases to ask about auditing those cooked books.
Of course, I've heard stories of studios keeping one set of books for the government and another set for people they owe money. Which goes back to that whole fraud thing.
Also, it's not just the movie/tv industry that does this. Just about any major industry that involves a content creator having a relationship with a content distributor you likely see the distributor stealing from the creator.
I believe that they spend all of their money on other companies that they own. i.e. Like a TV station where a lot of advertisement is done. Those TV stations have to pay taxes of the money earned. Even if money is lost by the film the contracting companies still have to make money (or their employees), and those are the ones that pay taxes. As long as they report where all the money is going it probably is not a problem.
Somebody eventually makes some money and as long as that money pays taxes the IRS is probably OK with it.
Knowing that this is how the game is played the actors just have to ask for a big pay check so that it works out the same at the end, more or less.
For years now I've assumed that's why A-list actors get such huge paychecks upfront, because they know they'll miss out if they're supposed to get percentage on profit.
But advertising costs has been one of the "excuses" I've seen why a movie fails to make money. I find that doubtful since the majority of advertisement spending is at the beginning of a movie's lifespan. Many movies continue to generate revenue years after theatrical release due to sales outside of movie tickets such as DVDs or streaming licenses.
In the end, I still have to wonder why such practices are continued to be ignored when they seem so suspect to begin with. Don't forget that the IRS is probably willing to spend a million dollars to squeeze that extra thousand bucks out of you, so I doubt they would just be OK with what they get.
If run correctly a Ponzi scheme can last a long time. As long as you can keep new people paying into the scheme then it keeps going. Ultimately the scheme falls apart when either someone takes a good hard look at the books or people quit paying in.
The key is to not let anyone realize it's a scheme to begin with. Hollywood accounting isn't quite like that since almost everyone understands that they do it.
By the studio "losing," in the majority of instances it's because the studio settled. They don't want to actually have this kind of stuff exposed and proven in court.
I'm too lazy to dig them up but I'm pretty sure these practices have been proven in court. I want to say the lawsuit against Newline by Peter Jackson did go to court and the court found that Newline did in fact hold money back from Jackson by a rather large amount. But it's been a while and I'm hazy on the details.
Regardless, as we've said, this is already a rather well-known practice so it's not like it has to be proven that much anymore.
Almost every case I've heard of where an actor or director sued the studio for cooking the books; the studio loses. Why is this not considered a criminal practice? If I were an IRS agent, flying-spaghetti-monster forbid, I think I would make a call to the studio after one of these cases to ask about auditing those cooked books.
Of course, I've heard stories of studios keeping one set of books for the government and another set for people they owe money. Which goes back to that whole fraud thing.
Also, it's not just the movie/tv industry that does this. Just about any major industry that involves a content creator having a relationship with a content distributor you likely see the distributor stealing from the creator.